It was the engineers of Motorola, who in the 1980s began to conceive of a project to drastically improve the organization’s quality monitoring processes. They believed that traditional methods employed so far, which measured manufacturing errors per thousand product units, were not sufficient. As a result they improvised the method to measure manufacturing defects per million opportunities. They termed this process innovation as the Six Sigma standard. In the years that followed, Six Sigma will play an instrumental role in propelling Motorola to a leadership position in the electronics industry, on back of saving the company billions of dollars in production costs and greatly improving production efficiency. Subsequently, Six Sigma was adopted by other industries and it evolved into a sophisticated and comprehensive Project Management tool for improving standards and processes of a business enterprise. The Six Sigma strategy is to integrate
“business operations, statistical measurements and product development, and it is now being applied to business areas as diverse as human resources, purchasing and customer service. Companies that have adopted these principles have reported dramatic increases in customer satisfaction, productivity and shareholder value. They have also shown significant savings, often without capital expense.” (Lipscomb & Lewis, 2004, p.30)
Sigma is a Greek alphabet and a mathematical symbol representing standard deviation, which Motorola engineers have adopted to their process. While many organizations have had difficulty putting Six Sigma theory to practice, understanding the subtleties will enable them to grasp the cause and effect relationships that are applied in Six Sigma. It represents “a structured thought process that begins with first thoroughly understanding the requirements before proceeding or taking any action. Those requirements define the deliverables to be produced and the tasks to produce those deliverables which in turn illustrate the tools to be used to complete the tasks and produce the deliverables.” (Drake, et.al, 2008, p.29) In this sense, Six Sigma could be a potent tool in Project Management.
The first step of Six Sigma is ‘Define’, where the problem is clearly articulated. It is here that mutual trust and cooperation between all parties are established. One party of stakeholders is the project team whose members are metaphorically designated as Champion, Master Black Belt, Black Belt, Green Belt and Team Members. In this stage, team members are selected and assigned different roles. The problem statement is developed and goals, benefits and milestones are set. The high level process map is also drawn. Process flowchart is a key tool used during this stage. There are four flowchart options to choose from: top-down, detailed, work flow diagram and deployment. For example, “this tool shows how various steps in a process work together to achieve the ultimate goal. Because it is a pictorial view, a flow chart can be applied to fit practically any need. The process map allows the user to gain an understanding of the process and where potential waste or bottlenecks could occur. It also could be used to design the future or desired process.” (Drake, et.al, 2008, p.30)
The second step is ‘Measure’, where the firm uses statistical methods to quantify the problem. The endeavor here is to understand the current performance levels and also to collect requisite data to improve all CTQs. Key activities encompassing this step include “defining the defect, opportunity, unit and cost metrics, collecting the data, determining the process capability.” (Smith, et.al, 2002, p.45) An important tool used during this phase is the SIPOC (Suppliers, Inputs, Processes, Outputs and Customers) Diagram.
One could cite numerous examples of successful Six Sigma implementation in the last three decades of corporate history. A prominent example is that of General Electric under the leadership of Jack Welch. Welch employed Six Sigma principles for the rail car repairs and aircraft engine imports projects. A large share of this success could be attributed to the proper implementation of the different stages of Six Sigma, especially the Measure. Through its meticulous application, GE “reduced repair time, redesigned its leasing process, reduced border delays and defects and improved overall customer satisfaction. Quantitatively, General Electric saved over $1 billion in its first year of Six Sigma application and then $2 billion in the second year. The company’s operating margin rose to 16.7 percent while revenues and earnings increased by 11 and 13 percent respectively.” (Smith, et.al, 2002, p.45)
The next step in Sig Sigma is Analyze. Here, the attempt is to investigate the fundamental cause of the project’s problem. The other objective is to scrutinize the reasons why defects and deviations from the norm are occurring. Upon a detailed study of these problems, the project team can start to design plans for mitigation. Sub-stages within this step are the identification of value and non-value added actions and the ascertainment o key CTQ (Critical-to-Quality) elements. In many ways, this phase of Six Sigma application is critical for a project’s success, because a lack of understanding and rigorous analysis is what leads to most defects and variations. For example, the following are some of the common deficiencies identified at the end of analysis stage: “Lack of control over the materials and equipment used; Lack of training; Poor instrument calibration; inadequate environmental characteristics; Hasty design of parts and assemblies.” (Drake, et.al, 2008, p.29) These items were based on the analysis of a manufacturing process, but could be adapted to the service industry as well. It is thus a generic Project Management tool available to all managers.
A good example of how Analyze stage in Six Sigma could add value to the enterprise is found in the case of Scottsdale Healthcare. The facility in Arizona was correctly able to identify its weakness through the Six Sigma analytic tools. For example, it was found that
“its overcrowded emergency department because it took 3 8 percent of the patient’s total time within the department to find a bed and transfer the patient out of the waiting room. Before implementing quality efforts, multiple intermediary steps existed in the process which inevitably slowed down the time from start to finish and reduced the potential yield. As a result of the DMAIC and Lean Sigma efforts, the facility identified the root cause of the problem was not that of finding a bed, as originally thought, but rather reducing the number of steps involved in the transfer process. This solution produced incremental profits of $600,000 and reduced the cycle time for bed control by 10 percent. Moreover, the patient throughput in the emergency room increased by 0.1 patients/hour.” (Grant, 2006, p.22)
The fourth stage of Six Sigma is Improve, where “the research of the problem’s root cause is actually put into work by eliminating all the defects and reducing the degree of variation.” (Lipscomb & Lewis, 2004, p.30) Important activities during this stage are the designing of experiments, design of various possible solutions, measuring failure modes of those solutions, validating hypotheses, and finally modifying/adjusting those possible solutions. A key tool used during this stage is Failure Mode and Effects Analysis, which helps identify a failure, its mode and effect through the research analysis. A prominent example of the importance of the Improve stage of Six Sigma is to be found in the Bank of America story, whereby the company was able to increase its customer base while also increasing overall efficiency. The improvement was drastic in that by the end of it, the company dealt with approximately 200 customer interactions per second and improved customer satisfaction. Further, in the very first year of Six Sigma implementation, BOA was able to decrease its defects by 88 percent, as errors were significantly reduced in customer delivery channels. Issues taking more than 24 hrs to get resolved reduced by 56 percent. Within a few years of adopting Six Sigma, BOA’s customer satisfaction index rose by 25 percent, which is a significant rise. (Grant, 2006, p.22)